Gold slides as ETFs jump amid safe-haven demand

Bloomberg

Gold prices might have had a lousy month, dropping by the most this year on a resurgent US dollar, but holdings in exchange-traded funds (ETFs) have jumped, with the worldwide total rising to the highest level since November last year.

The numbers spell out the different paths. Spot bullion last month sank 2.9 percent, and on Friday slipped 0.4 percent to US$1,282.55 per ounce at 3:30pm in New York.

Meanwhile, holdings in gold-backed ETFs expanded 2.4 percent to 2,154.9 tonnes. They are up for the third straight quarter and well on the way back to last year’s peak, when US President Donald Trump won the White House.

While prices have been hurt by the rebound in the US currency, plenty of investors are still seeking out havens, Singapore-based Oversea-Chinese Banking Corp Ltd (華僑銀行) economist Barnabas Gan said.

Top of the list right now might be the standoff between Trump and North Korean leader Kim Jong-un.

“ETF demand is likely driven by safe-haven demand, given the geopolitical tensions and the increased need to have safe-haven assets in investment portfolios,” Gan said.

Billionaire Ray Dalio, the founder of Bridgewater Associates LP, has recommended that investors consider placing 5 percent to 10 percent of assets in gold as a hedge against political and economic risks.

Gold traders and analysts surveyed by Bloomberg were bearish for a third straight week.

Gold futures for December delivery on Friday fell 0.3 percent to settle at US$1,284.80 per ounce on the Comex in New York. The metal dropped 2.8 percent last month.

Meanwhile, oil posted its biggest quarterly gain in more than a year on forecasts for rising demand and Turkey’s threat to halt Kurdish crude exports.

Futures last month jumped 9.4 percent and settled at above US$50 per barrel on Friday for the eighth straight session.

OPEC and the International Energy Agency last month boosted demand forecasts, signaling a surplus that has weighed on prices might shrink further.

Iraq on Thursday said that Turkey agreed to deal exclusively with the central government in Baghdad over exports of Kurdish crude, a step that could disrupt supplies.

Oil this week returned to a bull market on signs the persistent crude surplus was finally starting to shrink, while Trafigura Group and Citigroup Inc warned of a further supply squeeze in the next two years.

OPEC and Russia have hailed the success of their agreement to curb supplies and urged allies to stay the course.

The effects of Hurricane Harvey, which shut down a large number of refineries on the US Gulf Coast, have begun to fade.

West Texas Intermediate for delivery next month rose US$0.11 to settle at US$51.67 per barrel on the New York Mercantile Exchange. Prices advanced 12 percent during the quarter, the biggest gain since the second quarter of last year.

Brent for settlement next month, which expired on Friday, rose US$0.13 to close at US$57.54 on the London-based ICE Futures Europe exchange. The price increased 20 percent during the quarter. The global benchmark crude traded at a premium of US$5.87 to West Texas Intermediate.

In other energy trading, wholesale gasoline slid US$0.03 to US$1.61 per gallon, while heating oil declined US$0.02 to US$1.81 per gallon and natural gas gave up US$0.01 to US$3.01 per 1,000 cubic feet.

Silver slid US$0.17 to US$16.68 per ounce, while copper fell US$0.03 to US$2.96 per pound.